- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Hi I am struggling to find the cs ratio in this question. Please can you help me?
A company is budgeting to sell 200,000 units of its product next year at a price of $15 per unit. Fixed costs will be $1,232,000 and the variable cost/sales ratio is 44%.
Whats the breakeven sales revenue and whats the margin of safety in the budget?
If the variable cost is 44% of the sales, then for every 100 sales the variable costs are 44 and therefore the contribution is 100 – 44 = 56 (or 56% of sales).
So the CS ratio is 56% and then breakeven and margin of safety follow the normal rules.
If you are uncertain about them then you should watch the free lectures on CVP analysis.
Our free lectures are a complete course for Paper F5 and cover everything needed to be able to pass the exams well.
- You must be logged in to reply to this topic.